Edge #23 - What the media is overlooking in property

What I’m watching

Not exactly something niche this week, but I was so blown away by Top Gun: Maverick. Not sure if it’s just me, but I feel that action films have been quite mediocre the last few years and this has been a breath of fresh air.

The fact that every sequence was filmed practically is just mindblowing and really is an experience to watch. Highly recommended. The behind the scenes stuff is fascinating.

Resource of the Week

For any of you looking to get into writing stuff by hand, I wholeheartedly recommend Pilot’s Iroshizuki range of inks (never ask me how to pronounce please!). The colours are based on Japanese landscapes. They are truly sublime. It does get very addictive, and you’ll soon find yourself justifying why you need to buy the 5th different shade of pink!

Quote

“Man only likes to count his troubles; he doesn't calculate his happiness.”

Fyodor Dostoevsky

Thoughts

It seems that there has been a lot of media coverage regarding property since COVID. Mostly regarding the price. From fears of a crash due to a recession in the midst of lockdown to the crazy growth, and more recently interest rate rises dampening growth. What has had very little coverage but has a huge impact, is landlords liquidating and exiting the market. Hamptons data suggests that since 2016, a quarter of a million fewer homes have been purchased by landlords as a whole. Propertymark data supports this.

We’re seeing 80% of respondents agreeing landlords leaving the Private Rental Sector (PRS) has increased over the last 3 years. And of those leaving the PRS, 94% are selling their properties, contributing to a 74% increase in buy-to-let properties sold in the last 3 years.

This brings up the whole moral debate I see a lot of people comment on my channel. The whole landlords are bad for society debate. The logic goes: landlords purchase multiple properties with the intention of letting them out, therefore reducing the supply, which in turn pushes up house prices up, so now, no one can afford anything.

The data seems to paint a different picture.

In the same period as landlords leaving the sector, we’ve seen the fastest house price growth since the financial crisis. So this suggests that landlords are not the causes of the issues with regard to property prices. Conversely, this exodus has led to a worrying situation in the rental market.

The average number of rental properties per branch of estate agent has halved since 2019. It’s the reason we’re seeing a rise in asking rents across the board. With rises in interest rates, I don’t see the situation improving in the rental market as landlords continue to exit.

Conversely, I don’t see property prices falling in the short to medium term either. Slowing growth rate sure, but still continuing to grow. The rise in interest rates will be offset by the undersupply of properties, easing of lending criteria and things such as the first home discount scheme encouraging first-time buyers into the market.

Going back to my own experience, I completely understand why too. For those that have been following along, take the situation with my ex-problem tenant. During the 2 years, it cost around £3,000 - £4,000 fixing stuff they broke, they went a few months in arrears so that’s a few thousand, I was quoted £5,000 by the solicitors to do the eviction and to top it all off I’ve got a £1,500 bill for more remedial stuff after they left. Bearing in mind the profit margin for a property like this, for the entire year is only around £2,200 ish. There are far less stressful ways to invest your money. Something that isn’t factored in a lot of the time, you really have to be in it for the long term.

Hope that was helpful, as always hit reply if you have any feedback, I read and reply to all. Have a good week!

Hans